Globalization

Globalization Questionnaire Many factors have contributed to globalization. The biggest contributor of globalization has been the internet. Transportation and different types of communication (internet, cellular phones) are the main reasons for globalization. Globalization by definition is the merging of economies, trading, investing into one global system (Hill, 2009). Before globalization, national economies were contained within the respective nation but now the economies and production are becoming interdependent. Traditional International Theories International trading is beneficial because different countries produce different products. In international trading, some will benefit while others will not. The Ricardian model suggests that everyone could benefit from trade but the model is argued against by some who state that only one factor of production is the reason for the positive outcome (Suranovic, 2003). The Ricardian Model suggests that when countries have a comparative advantage in producing an item/good over another country, by trading the goods both will benefit because they specialize in the item/good that they have the comparative advantage for. Mercantilism is also a traditional international trade theory that was very prevalent in Europe (Hill, 2009) and was the first theory of international trade. Under mercantilism, the government provided the regulation for the particular nation’s economy in order for the nation’s power to increase. The primary emphasis of mercantilism was the power of silver and gold, the excess of exports and minimal imports (Hill, 2009). Adam Smith was an economist who was against the mercantilism theories and instead tried to promote free trade. Absolute advantage was a theory proposed by Adam Smith in 1776 (Hill, 2009). By allowing free trade, the invisible hand determines what country does the importing and exporting. If the government allows the citizens the power to control what is produced, bought and sold to other countries the market will determine the countries imports and exports. David Ricardo expanded on the comparative advantage theory while Eli Heckscher and Bertil Ohlin expanded on Ricardo’s theory (Hill, 2009).